Exelon 2015 Annual Report Download - page 313

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Customer Relationships. The customer relationship intangible was determined based on a “multi-period excess method” of the income
approach. Under this method, the intangible asset’s fair value is determined to be the estimated future cash flows that will be earned on the current
customer base, taking into account expected contract renewals based on customer attrition rates and costs to retain those customers. The fair
value is based upon certain unobservable inputs, which are considered Level 3 inputs, pursuant to applicable accounting guidance. Key
assumptions include the customer attrition rate and the discount rate. The accounting guidance requires that customer-based intangibles be
amortized over the period expected to be benefited using the pattern of economic benefit. The amortization of the customer relationships is
recorded in Depreciation and amortization expense within Exelon’s and Generation’s Consolidated Statements of Operations and Comprehensive
Income.
Trade Name. The Constellation trade name intangible was determined based on the relief from royalty method of income approach whereby
fair value is determined to be the present value of the license fees avoided by owning the assets. The fair value is based upon certain
unobservable inputs, which are considered Level 3 inputs, pursuant to applicable accounting guidance. Key assumptions include the hypothetical
royalty rate and the discount rate. The Constellation trade name intangible is amortized on a straight-line basis over a period of 10 years. The
amortization of the trade name is recorded in Depreciation and amortization expense within Exelon’s and Generation’s Consolidated Statements of
Operations and Comprehensive Income.
Renewable Energy Credits and Alternative Energy Credits (Exelon, Generation, ComEd and PECO).
Exelon’s, Generation’s, ComEd’s and PECO’s other intangible assets, included in Other current assets and Other deferred debits and other
assets on the Consolidated Balance Sheets, include RECs (Exelon, Generation and ComEd) and AECs (Exelon and PECO). Purchased RECs are
recorded at cost on the date they are purchased. The cost of RECs purchased on a stand-alone basis is based on the transaction price, while the
cost of RECs acquired through PPAs represents the difference between the total contract price and the market price of energy at contract
inception. Revenue for RECs that are part of a bundled power sale is recognized when the power is produced and delivered to the customer. As of
December 31, 2015, and 2014, PECO had current AECs of $2 million and $13 million, respectively. PECO had no noncurrent AECs as of
December 31, 2015 and 2014. As of December 31, 2015, and 2014, Generation had current RECs of $251 million and $191 million, respectively,
and $56 million and $44 million of noncurrent REC’s, respectively. As of December 31, 2015 and 2014, ComEd had current RECs of $5 million and
$4 million, respectively. ComEd had no noncurrent RECs as of December 31, 2015 and 2014. See Note 3—Regulatory Matters and Note 23—
Commitments and Contingencies for additional information on RECs and AECs.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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